SA Venture Capital Coming from Frankfurt Stock Exchange Listings

How and why South Africa and South African companies can benefit from joining the international financial market through the Frankfurt Stock Exchange for the advancement of SMEs within South Africa is an easy argument for one to make. Even recently the only firm actively listing firms in South Africa, www.fselistings.com, informed our publication that even Sponsor brokers for the Altx and JSE have started referring business to FSE Listings due to the ease of entry into the market, access to capital, and the lack of both in South African financial markets.

Unlike the Altx and the JSE, the Frankfurt Stock Exchange is an unlisted financial exchange first, which caters to the smaller international companies that could not even be considered for the domestic exchanges, followed by a fully-fledged international financial exchange offering a full range of products and services under the Deutsche Group umbrella which is the third largest stock exchange group in the world and completes over Euro 5.2 trillion in transactions per annum.

The rationale of South African companies listing on the Frankfurt Stock Exchange would be to take advantage of the international competitiveness of the FSE financial market which is not available within South Africa. South African’s are well aware of the challenges which include:

  • the lack of a formalised Over the Counter (OTC) market, or an unlisted market;
  • the illiquid monopolistic market and lack of venture capital within South Africa as a whole; and
  • the Reserve Bank and Clearing System challenges that don’t allow for South African Companies to list and compete at a global scale  for

The Frankfurt Stock Exchange is smart to capitalize on the JSE’s lagging behind in launching an OTC market, as Frankfurt has done so in India and China, running roadshows and marketing to local companies to list where an unlisted market doesn’t exist.

South Africa is one of the richest African countries and is ideal for listing companies on an international stock exchange that invests heavily in areas such as financial services, mining and exploration, oil and gas, agriculture, pharmaceuticals, energy, green technology, technology and communication, telecommunications, land development, automotive, and industrial or advanced manufacturing outlets.

South Africa currently has a monopolistic exchange environment, therefore there is clearly an opportunity for a competitor to enter this space and bring out products that will service the South African financial environment with access to an international exchange, the Frankfurt Stock Exchange.

The JSE is recognised as one of the most expensive exchanges in the world and this is compounded by the fact that it has a 44% shareholding in STRATE Limited and thus has some level of control over the cost of clearing and settling in South Africa.

Globally, capital markets development has been fostered by the establishment of competing financial market platforms such as NASDAQ, AIM, FSE-Xetra and PLUS, towards the objectives of greater access to capital for growth companies, and more efficient and cost-effective product delivery to the investing public. FSE Listings is proposing to market the listings into the Frankfurt Stock Exchange for unlisted companies within South Africa who would like to take advantage of an existing successful global market platform, growing South African companies and African companies into one of the top regions in the world for German and European investors to consider taking a stake in. The initiative is focussed on South Africa to assist in a market which has a developed and educated financial market but lack of access, we alleviate that pain by helping companies list on the Frankfurt Stock Exchange. The process takes only 5-6 weeks for South African’s to go public, which can often take years within the current domestic stock market.

The integration of capital markets with Europe through the Frankfurt Stock Exchange will also help spur accelerated economic growth and the creation of SME’s which create larger regional and financial capital markets, and have international reach both for capital and for marketing their products and services.

Taking advantage of the existing market efficiency of the Frankfurt Stock Exchange, the potential to speed up the process of financial innovation, liquidity, and facilitate increased foreign capital inevitably will help the South African economy and their growing SMEs.

The Frankfurt Stock Exchange is widely traded by foreign investors globally with 89% of their listed companies coming from outside of Germany, of which more than half are outside of Europe. One can try to develop an integrated market or they can list their company within 5-6 weeks on one of the most integrated stock exchanges in the world. The choice for companies should be simple, list on the Frankfurt Stock Exchange.

The model that the SADC has adopted for the past 15 years has not facilitated the desired growth and FSE Listings has taken all these factors into account and, based on international best-practice for developing economies, believes the Frankfurt Stock Exchange is the solution for South African companies, the SADC, and the African continent of businesses in general as one of the premier investment destinations worldwide.

Fee comparisons of the JSE Main Board, AltX, AIM and Frankfurt

  JSE Main AltX AIM FSE
Listing Cost R1.5m – R3.5m R1.5m – R3.5m R50 000 R50,000
Annual Fees 4 bp market cap R30 000 R50 000 R50,000
Advisory Sponsor (Variable) R90 000 Nomad (R1m+) FSE Listings (R600,000)

This table clearly shows that it is twice to 4 times the cost of listing on the Altx as it is to list on the AIM, and 5-6 times the cost of listing on the Frankfurt Stock Exchange when considering the Advisory fee of the Nomad and or Advisory`s associated with the foreign markets. The reality is however, that the investment in listing on the foreign market and benefits associated to listing in Frankfurt or the UK far outweigh any benefit that can be offered from listing on an illiquid, undercapitalized domestic market such as the Altx.

Contact info@fselistings.com today to discuss with a Frankfurt Stock Exchange specialist for listing South African companies.